Salary Needed to Afford a House Across Australia

The Australian property market has been found to be extremely unaffordable for the large majority, this is mainly due to the inability to meet minimum mortgage repayment criteria in almost all major cities.

The benefits of such an investment far outweigh the disadvantages and therefore it is becoming a new trend in countries like Australia where buying a home has nearly become impossible for most residents.

In this post, we will first have a look at the average salary needed in order to afford a house in Australia and then explore the concept of property co-ownership, which seems like a viable option if somebody really wants to become a homeowner. 

This article is not financial advice, if you’re seeking financial advice please speak with your accountant.

House prices have swelled in the past few years not just in Australia but all over the world.

Because of this, many people now consider buying a home an extremely difficult goal to achieve with their current salary. As a result, most of the residents choose renting over buying because it seems like the only viable option.

Almost half of the population in Australia now believes that having their own home is a dream that is not likely to be fulfilled in their lifetime.

What is Mortgage Stress? 

There is a term “mortgage stress”, which refers to a condition in which a homeowner has to pay more than 30% of their income to repayments on the loan.

As a result of which they start feeling stressed out in fulfilling their remaining financial responsibilities.

A survey has revealed that more than one million Australian residents currently suffer from mortgage stress.

Now, this is an alarming statistic. It means more than one million people in Australia do not earn as much as it is needed to live a comfortable life while having their own home.

Based on some statistics, it has been estimated that an annual income of $77,000 is required to afford a home in Australia.

Australia has eight capital cities and only two of them have a median house price that can be afforded within this average salary. This is based on a 30-year mortgage plan.

The cities we are talking about are Hobart and Adelaide.

Individuals that earn between $60,000 and $77,000 in Australia are able to technically "afford" to buy a home in these two cities on the average 30-year mortgage.

Most Australians, therefore, find it impossible to afford a home in their current salary if they are looking for a median-priced house.

This is where family assistance could come in handy, if there is a second income, a family member, a loved one or a spouse that could help support the loan, you may be able to secure a home loan.

Still, if anyone from the new generation would like to live in a city like Sydney, they would need to have an annual income of about $138,000 to be able to purchase a house.

Looking at these stats, the median price for a home in Sydney has been calculated to be around $875,000. Melbourne and Brisbane are cities that closely follow Sydney where median house prices are concerned.

In the state of New South Wales, about 90% of the median weekly earnings of an individual goes to the repayment of the loan.

On the other hand, Tasmania is only about 50% of the weekly income towards the repayment of the debt, and this is the lowest calculated median weekly earning!

This means that even if you decide to live in a state that offers good opportunities for home buyers, you will still have to pay about 50% of your salary to loan repayments.

The value of a median house in Tasmania has been calculated to be somewhere around $340,000.

If you have an annual income of $60,000, you are able to afford a home in Hobart that has a median price of around $357,000.

It is possible to buy a three-bedroom house in this city at the price mentioned here. South Australia has a median home price of $275,000 and here a person can afford a home if they earn around $45,000 annually.

The average wage in Australia has been estimated to be $74,000.

Most people consider this salary to be enough for living a comfortable life. However, everyone has their own definition and level of comfort that they want to achieve.

In cities like Sydney, Brisbane and Melbourne, not only the house prices are sky-high, the rents are also creeping up. It is extremely difficult to find a decent place to live in at $500/week in any major city.

If you are able to afford a rent of more than $500 per week in a city like Brisbane or Melbourne, you can also afford loan repayments on a median-priced house in the same city.

Other options like Western Australia or South Australia where the median weekly percentage of earning required for repayment is somewhere around $400.

On the other hand, if $400 rent sounds too much, it is unlikely that you would be able to afford weekly repayments on the loan.

Looking at all these facts and figures, it can be easily guessed that an average Australian resident is living under mortgage stress.

The average income that goes to repayment is clearly more than 30%, in fact, way above 30%, in each and every state of the country!

The cost of living is usually high in the capital cities so many people who wish to have their own home try to look for options in the regional areas. The average estimated repayment on a weekly basis in a city like Sydney is $620.

This means the person has to pay more than 100% of their weekly salary to the repayment of the loan. This is possible only when there is more than one person in the house who is earning. 

Taxable Salary Required to Avoid Mortgage Stress

The salary needed to afford an average house is different in different cities in Australia. Here is a roundup of the eight capital cities:

  • Hobart and Adelaide: $88,053
  • Perth: $90,827
  • Darwin: $94,467
  • Brisbane: $98,280
  • Canberra: $127,920
  • Melbourne: $134,834
  • Sydney: $173,160 

The median salary of individuals is calculated to be less than these figures in all cities mentioned above, which means in order to avoid mortgage stress these people would need to produce an added income source.

Conclusion

Having your own home means living a comfortable and stress-free life.

However, it is not always as simple as it sounds. Buying your own home in Australia means having to make mortgage repayments for the rest of your life.

As a result of this mortgage stress, most part of the homeowner’s income is spent towards repayment of the loan.

So, it is important to calculate the average salary needed to live comfortably in Australia. People who want to live in the capital city of Australia need to earn more than $150,000 even if they want a median-priced house.

Looking at these stats, you can easily place yourself in the affording or non-affording category. It also depends on which state you’re planning to buy a home in.

If you are ready to live in a state like Tasmania or a city like Hobart, you can actually afford a two or three-bedroom home but only if you fulfill the criteria of the average taxable salary needed to avoid mortgage stress.

Adelaide, Perth, and Darwin are among the most affordable capital cities in Australia; while Sydney, Canberra, and Melbourne are among the least affordable cities. Australia has a debt-to-income ratio of 190%, which is currently the highest in the world after Switzerland.

Only about 0.9% of Sydney suburbs have a median price of less than $500,000. These facts and figures are enough to indicate that a single individual cannot buy their own home in Australia.

The solution is to go for property co-ownership in which more than one person shares the ownership of a house and consequently they share the costs.

This has become a popular method of affording a house recently in Australia. However, there are pros and cons to consider when it comes to property crowdfunding. So, weigh your options carefully and then take a plunge.

Share this article: